1

A business has a good reputation. The owner wishes to include goodwill in the financial statements.
An accountant advises against it. Which accounting concept is the accountant applying?

A business entity B going concern C matching D prudence

A business makes up its financial statements to 30 April each year. Included in the ledger account
balances on 1 May 2022 was insurance (debit) $800. On 31 October 2022 an insurance premium of
$2100 was paid for the year ended 31 October 2023.

Which amount was charged for insurance in the income statement for the year ended 30 April 2023?

A $1050 B $1850 C $2100 D $2900

Which is not an appropriation of partnership profit?

A interest on capital B interest on drawings C interest on loan D share of profit

A company issues one million ordinary shares of $1 each at $1.30 per share. It also issues a
debenture for $500 000. What is the increase in the equity of the company?

A $1 000 000 B $1 300 000 C $1 500 000 D $1 800 000

The trial balance totals are as follows: debit $500 150 credit $500 000 Which error could have
caused the difference?

A A cash sale has only been recorded in the sales account.

B A credit purchase has only been recorded in a supplier’s account.

C A credit sale has not been recorded.

D A credit sale has only been recorded in a customer’s account.

A company provided the following information

Units Cost Per Unit

opening inventory 100 2.00
receipt of new inventory 400 2.10
issued to production 200

The company uses the first in first out (FIFO) method of valuing inventory. What is the cost of
material issued to production?

A $400 B $410 C $416 D $420

7

The following information is available.

budget Actual
Overheads $60 000 $66 000
direct labour 30 000 hours 35 000 hours

The overhead absorption rate is based on direct labour hours. What is the amount of overhead over-
absorbed or under-absorbed?

A $4000 over B $4000 under C $6000 over D $6000 under

A company issues one million ordinary shares of $1 each at $1.30 per share. It also issues a
debenture for $500 000. What is the increase in the equity of the company?

A $1 000 000 B $1 300 000 C $1 500 000 D $1 800 000

A business depreciates its machinery at 10% per annum using the straight-line method on a month-
by-month basis. The business’s financial year end is 30 June. Machinery which had cost $6600 on 1
April 2022 was sold on 30 November 2023. The profit on sale was $350. What were the sale
proceeds?

A $5150 B $5425 C $5850 D $6125

10

At the start of the year the provision for doubtful debts was $19600. During the year irrecoverable
debts of $12300 were written off. The provision for doubtful debts at the year end was $15 500.
What was the net effect of these items on the profit for the year?

A $4100 decrease B $4100 increase C $8200 decrease D $8200 increase

11

A company makes a 1 for 4 bonus issue of ordinary shares. What happens to share capital and total
equity?

share capital total equity

A increase decrease
B increase increase
C increase no change
D no change increase
12

A company has the following:

12 000 ordinary shares of $1 each

10% debenture $10 000 It made a loss of $15000 for the year ended 31 December 2023.

An interim ordinary dividend of $0.20 per ordinary share was paid on 30 September 2023.

An ordinary dividend of $0.40 per ordinary share was proposed at 31 December 2023. The retained
earnings balance in the statement of changes in equity at 31 December 2023 was $20 000. What was
the retained earnings balance at 1 January 2023?

A $37 400 B $38 400 C $42 200 D $43 200

13

Which item is a direct cost?

A carriage inwards on production materials B cleaning materials for the factory

C factory rent D wages of the factory manager

14

Victor is paid $10 an hour for a 40-hour week and at time and a half for overtime.

He is expected to produce four units an hour. If he produces more than this, a bonus of $2 per extra
unit is paid. Last week Victor worked 41 hours and produced 161 units.

How much was Victor paid?

A $410 B $412 C $415 D $417

15

A business operated a staff canteen at a cost of $12 000. What is the most appropriate basis of
apportioning this overhead cost?

A book value of canteen equipment B direct labour hours

C floor area D number of employees

16

Anthony purchased a van costing $20000. He provided an old van with a net book value of $8000 in
part exchange. There was a profit on disposal of $1500. What was the cash outflow arising from the
purchase?

A $9500 B $10 500 C $12 000 D $13 500

17

The following errors were found after a suspense account was opened.

1 Motor repairs of $400 were credited to the motor vehicle at cost account.

2 A payment for electricity was debited in the electricity account as $2500 instead of $5200.

3 A $450 cash purchase of goods for resale had been completely omitted from the books.

4 Discount allowed of $50 had been debited to the discounts received account. Which items would
be entered in the suspense account?

A 1 and 2 B 2 and 3 C 2 and 4 D 3 and 4

18

The following items are recorded in the cash book of a business but not yet recorded in its bank
statement.

Cheques Drawn $ 3000, Amount Received in Bank $ 250

The cash book shows a bank balance of $2600 credit.

What is the balance on the bank statement?

A $150 credit B $150 debit C $400 credit D $400 debit

19

Which statement about ordinary shares is correct?

A dividends on ordinary shares are an appropriation of profit

B dividends on ordinary shares are paid at the same rate each year

C ordinary shares are never issued at a premium

D the holders of ordinary shares are creditors of a company

20

How stepped costs are best described?

A costs that are always variable

B costs that have both a fixed and variable element

C fixed costs that are always the same amount at any level of output

D fixed costs which increase in total once a certain level of output is reached
21

A company’s profits using marginal costing and absorption costing principles were identical. Which
statement is true about the company’s production units?

A they were greater than break-even units

B they were greater than the sales units

C they were the same as the break-even units

D they were the same as the sales units

22

A company decided not to capitalise the purchase of a stapler for use in its office. Which accounting
concept was the company applying?

A consistency B duality C materiality D prudence

23

A business maintains a mark-up of 40%. The following information was available for the year.

Revenue $ 280000

Opening Inventory $ 44000

Purchases $ 175000

What was the value of closing inventory?

A $19 000 B $37 000 C $51 000 D $69 000

24

A limited company made the following issues of shares.

Bonus issue of 20 000 ordinary shares of $0.50 each

Rights issue of 10 000 ordinary shares of $0.50 each at a price of $0.75 each

By how much did the issues increase the equity of the company?

A $5000 B $7500 C $15 000 D $17 500

25

Actual production is less than forecast production. Which cost is higher than forecast?

A fixed cost per unit B total fixed cost C total variable cost D variable cost per unit

26

Which action would increase a company’s current ratio?

A paying rent in advance B receiving money from trade receivables

C repaying a long-term loan D selling non-current assets

27

A company has fixed costs during a quarter of $300 000. It sells its single product for $25 per unit
and has a contribution to sales ratio of 40%. How many units of product does it need to sell to make
a profit of $100 000?

A 10 000 B 16 000 C 30 000 D 40 000

28

The business has forecasted the following details

Production level Total Cost

15000 units $ 406 000
25000 units $ 546 000

What is the fixed cost?

A $196 000 B $238 000 C $336 000 D $357 000

29

A company has ordinary share capital of $80 000. Each share has a nominal value of $0.25. A
dividend of $0.06 per share is paid. What is the total dividend paid?

A $1200 B $4800 C $15 200 D $19 200

30

The owner of a transport business purchased a motor vehicle. This was charged to the motor
expenses account.

What were the effects of this on the end-of-year statement of financial position?

Non- Current Assets Current Assets Capital Account

A Overstated No Effect Overstated
B Overstated Overstated No Effect
C Understated No Effect Understated
D Understated Understated No Effect